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Wholesale prices in December posted their biggest increase in nearly a year, lifted by more expensive energy and food costs. But most other prices were largely well behaved, suggesting inflation isn't spreading through the economy.

The Producer Price Index, which measures price changes before they reach consumers, rose 1.1 percent in December, the Labor Department reported Thursday. That was up from a 0.8 percent rise in November and was the largest increase since January 2010.

But outside the volatile energy and food categories, all other prices rose just 0.2 percent, down from a 0.3 percent rise in November. That lower reading on "core" prices indicates that inflation isn't breaking out. In fact, most of the increase in core prices last month was due to a 2.9 percent increase in cigarette prices.

Federal Reserve Chairman Ben Bernanke predicts inflation won't be a problem for the economy this year.

Companies are still operating below full capacity and are under competitive pressure to keep a check on prices. Hiring is improving only gradually, meaning workers have little leverage to demand big pay raises.

In fact, Bernanke and other Fed officials for most of last year were worried that the weak economy could push the country into a period of deflation. That's a prolonged drop in prices, wages and values of homes and stocks. It's damaging to the economy and to the financial well-being of individuals and businesses.

For the 12 months ending December, wholesale prices rose 4 percent. That was down from a 4.3 percent rise in 2009. Meanwhile, "core" prices rose 1.3 percent last year, up from a 0.9 percent increase in 2009.

The U.S. Agriculture Department reported Wednesday that grain prices surged to their highest level in 2 1/2 years. Prices rose as corn and soybean production fell.

A Fed survey of business conditions around the country also released Wednesday found that companies are paying more for materials including oil, food products, steel, textile and chemicals. But competitive pressures prevented them from passing those increased costs on to customers in the form of higher prices.

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lisak1960

We are doing exactly what has been done in Socialist Mexico. They have "The richest man in the world", they are the largest producer of silver in the world, and they have lots of oil, yet the average Mexican lives in poverty, making less than six dollars a day. That is what our evil, ultra rich TV and Movie Stars want here. It gives them all of the power and wealth. And the poor duped Democrats will never figure out what hit them until it is too late. Brilliant.

I am in the food industry. You haven't seen nothing yet! Food prices are going much higher. Costs of ingredients for everything are increasing very fast and will continue to show up daily. Combine this with the high and going higher cost of fuel needed to transport the food items to your local store and you will be shocked at the increases going forward. Also, the world sells to the U.S. whatever is left. The U.S. is the most difficult country for the rest of the world to export to. The paperwork and restrictions the U.S. puts on imports make the world growers first sell their crops to the rest of the world, then whatever is left is offered to the U.S. With our cheap currency and subsidies the rest of the world is buying our goods and that demand especially from China is creating shoptages and causing prices to increase. The U.S. government applauds our increase in exports of agricultural products so they can then say the trade deficit is smaller. In the meantime we pay much higher prices for food. You ain't seen nothin' yet! Prices of food items will shock you very soon! Great time for a diet America! One last comment, package sizes are decreasing not so the food companies and grocers can make more money but because ingredient costs are skyrocketing. Manufacturers know that there is a "magic" price point for everything and once that is exceeded the consumer will no longer buy it so it is better to reduce the weight to absorb the cost increase than raise the retail. Get use to eating and drinking less-this may be the only good thing that comes out of these higher prices, maybe a few pounds will be shed from this nation full of overweight people!

And as the bickering goes on, evil, ultra rich men like George Soros are laughing all the way to their gold filled vaults. Have any of you ever wondered why the evil, rich elite and the uninformed poor people generally vote for the Demoncrats, while the working middle class overwhelmly votes Conservative?

You can thank Ben Bernacke and the Federal Reserve for the rise in gas and food prices. They are flooding the market with new fiat (counterFed) money that they print out of thin air. Of course prices are going to rise. The Fed doesn't care about the little guy. They are just trying to inflate their way out of the massive governmet debt that they have created. (By making more debt!!) This especially screws people on fixed income. All you seniors out there had better start complaining. We need to audit then end the Fed, and not allow Congress to raise the debt ceiling any higher

I agree, tsafa. Inflation is sky high for those who are in particular unemployed. Energy and food is the vast majority of their budget spending. Only clothing has to come on board, and the three necessities (food, clothing, shelter) will have all the inflation. What this shows is our standard of living is tanking. And I am sure we have not hit bottom yet. Look at the foreclosure anticipations for this coming year. And that involves one of the three necessities.

So inflation is very low as long as you don't Eat or Drive. That's just GREAT!!!! The CEO of Shell Oil said gas will be $5 a gallon by the end of the year...but that doens't matter because CORE INFLATION will still be low!! And Obama said all the troops would be out of Iraq 16 months after he took office, but the 1st Cavalry Division is headed back. No problem...it's all Bush's fault.

Going into Obama's third year he has learned nothing from his prior mistakes, all of which has cost us dearly. We now officially have inflation, N. Korea will be a threat to us in five years, Venezuela getting heavily armed, Gas prices going to the roof , higher foreclosure rate than during the great depression, and unemployment is constantly rising , 445K this week alone. How can things get worst ? What will it take for some of these cool aid drinkers to realize this man has had his time , and he is sadly and grossly incompetent.